Volatility forecasting: long memory,regime switching and heteroscedasticity

In this article, we account for the first time for long memory, regime switching and the conditional time-varying volatility of volatility (heteroscedasticity) to model and forecast market volatility using the heterogeneous autoregressive model of realized volatility (HAR-RV) and its extensions. We present several interesting and notable findings. First, existing models exhibit significant nonlinearity and clustering, which provide empirical evidence on the benefit of introducing regime switching and heteroscedasticity. Second, out-of-sample results indicate that combining regime switching and heteroscedasticity can substantially improve predictive power from a statistical viewpoint. More specifically, our proposed models generally exhibit higher forecasting accuracy. Third, these results are widely consistent across a variety of robustness tests such as different forecasting windows, forecasting models, realized measures, and stock markets. Consequently, this study sheds new light on forecasting future volatility.     

VIX term structure and VIX futures pricing with realized volatility

Using an extended LHARG model proposed by Majewski et al. (2015, J Econ, 187, 521–531), we derive the closed-form pricing formulas for both the Chicago Board Options Exchange VIX term structure and VIX futures with different maturities. Our empirical results suggest that the quarterly and yearly components of lagged realized volatility should be added into the model to capture the long-term volatility dynamics. By using the realized volatility based on high-frequency data, the proposed model provides superior pricing performance compared with the classic Heston–Nandi GARCH model under a variance-dependent pricing kernel, both in-sample and out-of-sample. The improvement is more pronounced during high volatility periods.     

Measuring Inflation Anchoring and Uncertainty: A U.S. and Euro Area Comparison

We use several U.S. and euro‐area surveys of professional forecasters to estimate a dynamic factor model of inflation featuring time‐varying uncertainty. We obtain survey‐consistent distributions of future inflation at any horizon, both in the U.S. and the euro area. Equipped with this model, we propose a novel measure of the anchoring of inflation expectations that accounts for inflation uncertainty. Our results suggest that following the Great Recession, inflation anchoring improved in the United States, while mild de‐anchoring occurred in the euro area. As of our sample end, both areas appear to be almost equally anchored.     

The importance of consumer multihoming (joint purchases) for market performance: Mergers and entry in media markets

Consumer “multihoming” (watching two TV channels, or buying two news magazines) has surprisingly important effects on market equilibrium and performance in (two‐sided) media markets. We show this by introducing consumer multihoming and advertising finance into the classic circle model of product differentiation. When consumers multihome (attend more than one platform), media platforms can charge only incremental value prices to advertisers. Entry or merger leaves consumer prices unchanged under consumer multihoming, but leaves advertiser prices unchanged under single‐homing: Multihoming flips the side of the market on which platforms compete. In contrast to standard circle results, equilibrium product variety can be insufficient under multihoming.     

Medicaid and long‐term care: The effects of penalizing strategic asset transfers

Medicaid provides a critical source of insurance for long‐term care, and individuals may strategically offload assets (typically to children) to meet the means‐tested eligibility requirement. In this article, we quantify the extent of such behavior using variation in the penalty for improper parent‐to‐child transfers induced by the Deficit Reduction Act of 2005. We estimate difference‐in‐differences models based on the hypothesis that only individuals with high levels of nursing home risk (high risk) will alter transfers because of the Act. We find that over a 2‐year horizon, high‐risk individuals reduced transfers to children on the extensive margin by 11 percent and that the average total amount of transfers decreased by $4,860. The results hold only for coupled respondents. We also conduct a triple‐differences analysis to examine heterogeneity with financial literacy and find that even those with a low level of financial literacy responded to the penalty.     

Long-term forecasting of fuel demand at theater entry points

Managing the distribution of fuel in theater requires Army fuel planners to forecast demand at the strategic level to ensure that fuel will be in the right place, at the right time, and in the amounts needed. This work presents a simulation approach to forecasting that accounts for the structure of the supply chain network when aggregating the demand of war fighters across the theater over the forecasting horizon. The resulting empirical distribution of demand at the theater entry point enables planners to identify forecast characteristics that impact their planning process, including the amplitudes and temporal positions of peaks in demand, and the estimated lead time to the point of use. Experimentation indicates that the forecasts are sensitive to the pattern of war fighter demand, the precise structure of the in-theater supply chain network, and the constraints and uncertainty present in the network, all of which are critical planning considerations.     

股权金融市场、增长方式选择与平衡增长：传统与新兴部门视角*

为探究股权金融市场对增长方式选择和平衡增长的影响，本文基于传统与新兴部门的差异，构建动态理论模型并利用“Simulink”技术进行数值模拟分析。理论分析发现股权金融市场效率对平衡增长具有增长效应且存在门槛条件，效率高于门槛值时股权金融市场发展将提高平衡增长率和创新贡献率。总体上，发展股权金融市场将促进我国平衡增长和增长方式转变，但东、西部地区存在差异，发展股权市场可以加快东部地区创新型增长而对西部地区没有显著作用。     

A mixed behaviour equilibrium model with mode choice and its application to the endogenous demand of automated vehicles

This study develops a mixed behavioural equilibrium model with explicit consideration of mode choice (MBE-MC) in a transportation system where fully automated vehicles (AV) coexist with conventional human-driven vehicles (HV). For the mode choice, travellers select among three options, following a logit modal split: driving their private HV, or taking an AV mobility service provided by either a firm or the government. For the route choice, the HV drivers follow the random utility maximisation principle while central agents route the AV passengers following the Cournot Nash (firm agent) or Social Optimal (government agent) principles. We consider two types of travel costs (i.e. travel time and monetary travel cost) to characterise the new features (e.g. expanded link capacity and reduced value of time) of the mixed AV–HV transportation system. We model the MBE-MC problem in a combined mode–route choice framework and formulate it as a route-based variational inequality (VI) problem. We show the equivalence between the VI formulation and the MBE-MC problem, and the existence of a solution to the MBE-MC problem. Then, we modify a partial linearisation algorithm for solving the proposed model. Numerical results validate the equilibrium conditions and show the efficacy of the new model in capturing the features of the mixed AV–HV transportation system. The impact patterns of different parameters on (1) the network performance in terms of AV share and system cost and (2) on the solution efficiency are analysed.     

A game theoretic approach to optimize multi-stakeholder utilities for land acquisition negotiations with informality

To combat the critical stresses of rising urbanization, the government acquires land from private owners using the power of eminent domain. This land assembly causes negative externalities such as increasing social tension and injustice that may impose a long-term threat to stability and sustainable development. Therefore, there is a need to make the land acquisition process more transparent and just. Considering the unique Indian context where informality has a strong presence, we propose an approach based on game theory that models the bargain through a three-stage Nash equilibrium game. Four agents – the government, the private developer, the landowner, and the free rider – are considered. We provide conditional solutions for the generalizable Case and proceed to model different stakeholder behavior patterns through two utility functional forms – linear and exponential. In the linear case, we find that the free rider obtains half of the revenue of the project, whereas the landowner gains between one-fourth and one-half of the revenue. Thus, we highlight the undeniably crucial role free riders play in land acquisition negotiations. However, closed form solutions cannot be obtained for the exponential form, due to which we use simulations to demonstrate a solution procedure. We conclude by stating that the proposed model can be useful in formulating future land policies in a sustainable and inclusive manner, with optimal utility derivations for all concerned stakeholders. Our model can also be extended to other spatial contexts where informality features heavily in the land market, especially in the Global South.     

The dynamic effects of infectious disease outbreaks: The case of pandemic influenza and human coronavirus

Pandemic influenza is a regularly recurring form of infectious disease; this work analyses its economic effects. Like many other infectious diseases influenza pandemics are usually of short, sharp duration. Human coronavirus is a less regularly recurring infectious disease. The human coronavirus pandemic of 2019 (COVID-19) has presented with seemingly high transmissibility and led to extraordinary socioeconomic disruption due to severe preventative measures by governments. To understand and compare these events, epidemiological and economic models are linked to capture the transmission of a pandemic from regional populations to regional economies and then across regional economies. In contrast to past pandemics, COVID-19 is likely to be of longer duration and more severe in its economic effects given the greater uncertainty surrounding its nature. The analysis indicates how economies are likely to be affected due to the risk-modifying behaviour in the form of preventative measures taken in response to the latest novel pandemic virus.